Vol 3, Issue 2. Quarter 1 – 2026.

Let’s begin with a few obvious facts.

1. It is better to have something and not need it, than to need something and not have it.
2. Money doesn’t buy happiness – but it rents a lot that is awfully darn close.
3. The “scholars” telling you that more money won’t make you happier, are typically tenured professors who have guaranteed income for as long as they want it.

Let’s assume that your retirement will feature at least one Social Security check each month. This is true for the overwhelming majority of the folks reading this post. (In fact most households will have 2.) Would you be happier if you had a lot more than that? We all suspect that the answer to that question is YES. Should you feel guilty if you will not have a lot more than that? I am going to argue that the answer to that question is NO.

Let’s simplify the question to get to what really matters.  Can you live off of Social Security (SS) alone in retirement? If the answer to this question is YES – then most people will rest a lot easier. I am not prepared to make such a blanket statement, BUT I am prepared to say something surprisingly close.  That’s because the best answer that I can give is – yes, IF you have the right plan in place to deal with a few key elements. We elaborate with a simple example.

Look at Joe. Joe makes $100K per year on his job. Of that amount he loses about $10K in income taxes. He spends about $20K on a mortgage. He loses about $7K in Social Security Taxes. Since he is retiring soon, he now puts $10K into his retirement account. In addition, Joe spends about $5K on work related expenses such as driving, lunch, clothes, etc. Accounting for all of these expenses, Joe is actually living off of $100 – $10K – $20K – $7K – $10K – $5K = $48K. The point is that Joe actually lives off of about half of what he is paid. If he ends up with a SS check that is about 40% of that, the gap is likely to be quite manageable. Here are a few recommended steps for Joe to attend to, to make this feasible.

• Pay off the mortgage

This is obviously the most critical piece of advice for at least two reasons. First, it was his biggest expense. But in addition, having a paid off mortgage allows the house to serve as Joe’s “emergency fund” that may get tapped into during Joe’s final days for healthcare or burial cost. Not a pleasant thing to think about, but real, none-the-less.

• Stop contributing to retirement accounts or paying SS taxes.

This is a no-brainer and are expenses that take care of themselves upon retirement anyway.

• Pay more attention to taxes.

Joe is going to have to think carefully about what account to draw from, how much to spend each year, where to shop, etc. This is true for all of us, but most of us are quite lax in our thinking about taxes while we are working. For example, many retirees don’t realize that they can get a partial or complete exemption from some property taxes. This varies dramatically from state to state and from county to county. You will have to research this one in your local setting.

• Make the hard choices about where you live.

Even in Texas it is quite clear that having $100K per year in Frisco, ain’t the same as having the same amount in Brownsville, or Lubbock etc. Joe may need to move to a lower cost area to make his finances easier to manage.

• Focus on free pastimes.

Joe will have to spend more time in the library and less time in the bookstore. He will have to do more in a garden and less in a restaurant. More viewing of sunsets and less viewing of movies, etc. This is really the easy part, and is probably the part that most people focus on too much in comparison to the other points.

• Don’t ignore small earning opportunities.

Temporary work, part time work, selling or reselling items, liquidating assets that don’t really do anything for you etc. For example, I still have a small piece of land in Florida that I pay taxes on each year. It’s only about $200 per year, but it is a pure waste of money. That thing needs to go ASAP.

• Consider your planning horizon.

Many folks default to the famous 4% rule regarding whatever retirement savings they have. We have written in other posts about how to raise this to 5 or even 6% in most years if you are prepared to be flexible. But the larger issue may be that most of us forget that this rule was created assuming a 30-year planning horizon. This is a painful question to answer, but do you really have that long to live? As you age, your planning horizon has to shrink along with it. This is why RMD (Required Minimum Distribution) rules lead to increasing the percentage of the account balance that is withdrawn with age. Not the most pleasant thing to think about, but a reasonable approach.

By now you have noticed that I cheated here. I explicitly stated that Joe has some funds in savings, because that is going to be the case for the vast majority of the folks who read this content. I ignored that because virtually all of you will stretch the SS check as far as possible before you touch any of those assets. I am going to routinely tell you not to, but you are going to do it anyway. That’s just how humans work. We have spoken elsewhere about withdrawal rules for these funds. If you want the single best source of information about this piece of the puzzle, let me recommend, “How Much Can I Spend in Retirement” by my favorite egghead in this space – Wade Pfau. I am not paid anything for this recommendation, and Wade’s book is written in such deep detail that you will definitely fall asleep with it a few times before you finish. But the information inside is the most exhaustive treatment of that problem known to man.

Let’s now summarize what we have said here. First, your Social Security check(s) is (are) likely to be a lot closer to what you actually live off of, than it appears. Second, hope is not a plan. If you “hope” to be ok with your monthly check, then you need a plan to make that a reasonable expectation. Third, the options available to you when you build that plan are more varied than simply spending whatever you want, vs. starving in the streets. We all need to explore the long list of possible choices in between. My main message is that if you do that intentionally, in advance, you are going to be fine.

For those of you not quite at this point, here is the recipe that will make this problem easier to manage when you do get to it.

1. The time to invest is NOW. The amount to invest is the money that you do not need to live off of today.
2. The correct share of equities in your portfolio is as much as you can stomach.
3. The correct planning horizon (today) is the retirement of your grandchildren.
4. Diversification is the only free lunch that we know of, and we want it at the lowest possible cost.
5. Until you feel like you have a better model, that you can live with in any possible outcome, simply stick with this one. 

Whatever anyone is selling that deviates from this plan is of no interest to us. But if someone is adding something to this for use after we settle down. Let’s talk about it. Until then, have a nice day!